IMT and Stamp Tax Exemption on Property Acquired in Insolvency Proceedings – CAAD Case 649/2015-T

ARBITRAL DECISION

I – REPORT

1. On 22 October 2015, A… – Actividades Hoteleiras, Lda, legal entity no…, with registered office at Rua … no…, …, filed a request for the constitution of an Arbitral Tribunal to rule on the acts of assessment of Municipal Tax on Onerous Transfers of Real Property (IMT), in the amount of € 30,644.75 (document no…) and Stamp Duty (IS) in the amount of € 4,168.00 (document no…), which should be annulled, with reimbursement of amounts paid, and payment of accrued and accruing interest. In addition to the power of attorney, it filed fourteen documents.

2. In the Request for arbitral ruling, the Claimant opted not to designate an arbitrator, and by decision of the President of the Deontological Council, in accordance with Article 6(1) of the RJAT, the signatory was appointed as sole arbitrator, who accepted the appointment within the legally prescribed period.

3. The arbitral tribunal was constituted on 4 January 2016.

4. The Tax and Customs Authority (AT or Respondent) sent, on 2 February 2016, its Reply and the administrative file (PA), with the Claimant submitting on 23 February 2016 a response to the exceptions raised and three documents.

5. The AT raised on 1 March 2016 the untimeliness of the questions of fact and law dealt with in the text of the Claimant regarding the exceptions, but after several arbitral orders the matter was stabilized, with the tribunal to rule finally on the exceptions, and the Respondent to exercise the right to be heard in final submissions.

6. After diverse unsuccessful attempts to hold the meeting provided for in Article 18 of the RJAT with a view to examining witnesses, the last of which on 8 July, the Claimant came to waive the examination of witnesses and insist on the delivery by the Respondent of a vast collection of information regarding the deceased B… (such as acquired real property, rental contracts, places of residence, income statements), which was rejected by arbitral order of 7 July, it being further clarified in an order of 8 July 2016 that, with the consent of the Respondent, the meeting provided for in Article 18 of the RJAT was dispensed with, a period of 15 days being set for submissions, to run successively, the period for the decision being extended in accordance with Article 21(2) of the RJAT to 4 September. Meanwhile, owing to the course of judicial recess, the period for issuing the decision was again postponed, the date of which was, after the presentation of submissions, respectively on 22 August and 6 September, set for 30 September.

7. The Request for Ruling

The Claimant argues, in summary:

• It acquired the real property situated at Rua …, … to …, corresponding to article … of the parish of … in …, for the amount of € 521,000.00, within the framework of the insolvency proceeding, no…/10… …, pending in the 6th Civil Court of ….

• The real property object of the purchase corresponds to a building composed of ground floor, two floors and attic and the establishment of the deceased B…, whose estate, opened by his death, was declared insolvent in the aforementioned proceeding.

• The deceased never lived in the real property, acquired it within the framework of his business activity, exploiting it commercially, giving part on lease to the Claimant and to other tenants, deriving real estate income.

• Before the acquisition of the real property, the Claimant requested the issuance of tax assessment notices for IMT and Stamp Duty, with exemption, within the framework of the insolvency proceeding, but the Respondent issued the notices without any exemption, rather with assessment of IMT and IS respectively in the amount of € 30,644.75 and € 4,168.00, which the Claimant paid but, on 22 January 2015, requested the annulment of the assessment acts and reimbursement of these amounts.

• Notified of the draft dismissal, it exercised the right to be heard, but the complaint was dismissed by order notified on 28 July 2015, with the indication that the same could be challenged within three months.

• For the purposes of the CIRE, enterprise is any organization of capital and labor intended for the exercise of an economic activity (article 5 of the CIRE), whereby the sale of an establishment of the insolvent estate, as is the case, would always be exempt from the assessment of IMT and Stamp Duty, by application of Articles 269, subparagraph e), and Article 270(2), both of the CIRE.

• The aforementioned purchase and sale would be covered by the application of the aforementioned articles, as it is merely a sale of an asset of the insolvent estate, and the law does not provide for the condition mentioned in the dismissal order that exemptions are limited to cases where real property is integrated into the universality of the enterprise or establishment sold, as indeed has been the understanding of the STA.

• The CIRE intended (no. 49 of the preamble) to maintain, in essence, the fiscal benefits of the regimes existing in the CPEREF, whose article 121 exempted from sisa the transfers of real property integrated in any of the enterprise recovery measures that arise, namely, from the sale, exchange or transfer of elements of the enterprise assets, whereby what is stated in the preamble should be taken as authentic interpretation of article 270(2) of the CIRE.

• This interpretation is the only one compatible with the legislative authorization granted by Law no. 39/2003, of 22 August, and with the scope of the sisa tax exemption provided therein in Article 9(3), and any restrictive interpretation of Article 270(2) of the CIRE is unconstitutional by violation of the reserved competence of the Assembly of the Republic.

• The assessment acts for IMT and Stamp Duty now challenged should therefore be annulled, and the reimbursement of the tax amount paid shall be ordered, increased by accrued and accruing interest at the rate of 4% per annum.

1. The Reply

The Respondent replied, in summary:

Existence of Exceptions

Untimeliness of the Request for Arbitral Ruling

• The request submitted on 22 October 2015 is untimely as the period for challenging the assessment acts whose annulment it seeks has been exceeded, with the final payment date being 24 October 2014.

• Although the Claimant filed a Complaint for Administrative Review against both assessment acts, it presents in the Request no arguments against the dismissal act which fell upon it and which should be, as decided in other proceedings at the CAAD, the direct object of the Request, under penalty of untimeliness of the request which leads to dismissal of the case (Articles 577 and 278(1) both of the CPC, applicable ex vi of Article 29(1-e) of the RJAT).

Impropriety of the Procedural Means

• Alleging that the Claimant violates the right to tax exemptions provided for in Articles 269-e) and 270(2) of the Code of Insolvency and Enterprise Recovery ("CIRE"), there is error in the form of procedure because the procedural means adequate for assessment of the granting of fiscal benefits is an administrative action, the means adequate for assessment of acts in tax matters (Article 97(2) of the CPPT), and not the request for arbitral ruling, a means of challenge intended for assessment of tax acts, there being impropriety of the procedural means which constitutes a dilatory exception leading to dismissal of the case as to the claim in question.

Incompetence of the Singular Arbitral Tribunal ratione materiae

• Thus, the Singular Arbitral Tribunal is incompetent (Article 2 RJAT) to judge the request because the assessment of any questions relating to the recognition of tax exemptions is a matter reserved to the jurisdiction of the administrative and tax courts, which leads to dismissal of the case.

• The Arbitral Tribunal is, moreover, incompetent for the assessment of the recognition of two tax exemptions related to the transfer of real property integrated in an insolvency proceeding because only the judge holding the insolvency proceeding is in a position to verify the legal prerequisites required in Article 270(2) of the CIRE (such as what occurs with the verification by the judicial judge of the prerequisites for application of the similar exemption provided for in Article 8 of the IMT Code, where it is necessary to present the judicial deed or sentence ratifying the transaction) the Arbitral Tribunal not having minimum elements to assess the verification of the legal prerequisites required in Articles 269-e) and 270(2) of the CIRE, elements which the Claimant neither alleges nor, still less, proves). Being the recognition of exemptions a question subject to judicial jurisdiction, there is a dilatory exception which prevents the continuation of the proceeding, leading to dismissal of the case.

On the Merits

• The deceased, B…, never possessed a commercial establishment, whether dedicated to the purchase and sale of real property, whether dedicated to any other activity, as the other elements required by law and doctrine on this matter were not met.

• Framing the activity in the purchase and sale of real property would not make it, solely by that fact, an enterprise for the purposes of application of Articles 269-e) and 270(2) of the CIRE.

• A real property acquired by a natural person liberal professional with a view to obtaining, through its lease, real estate income does not constitute a commercial establishment; it is one's own asset, a real estate asset of a natural person.

• Even if the deceased B… constituted, by himself, a commercial establishment, the sale of the real property in question would be reduced to the sale of an asset of the establishment itself and never to the sale of the establishment itself—the Claimant itself recognizes that the real property in question was only one among "others" acquired by the deceased B…, and it is not clear whether it argues that the deceased had a commercial establishment in each and every one of the leased real properties of which he was owner.

• The deceased, upon ceasing his professional activity on 21 June 1991, ceased to be a merchant in his own name, whereby he would always have ceased on that date to have a commercial establishment.

• Even if the deceased B… were a commercial establishment, the insolvency proceedings in case no…/10…, 6th Civil Court, do not correspond to the insolvency of the purported "commercial establishment B…" but to the estate opened by B…, which is not an enterprise, a merchant or an establishment.

• In addition to being based on erroneous factual assumptions, the Claimant makes an erroneous interpretation and application of the applicable legal norms because, before the emergence of the CIRE, the fiscal benefits in bankruptcy matters were provided for in Articles 120 and 121 of the CPEREF, approved by Decree-Law 132/93, of 23 April, which respectively provided exemption from IS and Sisa Tax (IMT after the 2004 reform) in the transfer of commercial establishments and the sale of elements of the enterprise assets, with Article 121(2) defining the transfers of real property, integrated in any of the enterprise recovery measures.

• After the substitution in 2004 of the CPEREF by the CIRE, approved by Decree-Law 53/2004, of 18 March, Article 270 of this diploma came to have a wording different from Article 121 of the CPEREF, also altered by Law no. 66-B/2012, of 31 December.

• Comparing the wording of Article 121 of the CPEREF and what is established in the letter of Article 270(2) of the CIRE, regarding the exemptions from sisa and IMT, it is concluded that the content of the norm regarding exemption from IMT resulting from performance in kind and transfer of assets to creditors was maintained (Article 121-b) of the CPREF now Article 270(1-c) of the CIRE), but as for acts of sale, exchange or transfer, the legislator made a fundamental change—the exemption from IMT resulting from acts of sale, exchange or transfer of the enterprise ceased to refer to "elements of the enterprise assets" and to "long-term leases" [Article 121(2-c) of the CPEREF], but only and solely to the "enterprise" or "establishments thereof" [Article 270(2) of the CIRE].

• In light of the elements brought to the proceedings, which point to the fact that the Claimant acquired only a real estate asset of a natural person (and not a commercial establishment and much less of an insolvent enterprise), it is necessary to conclude that it is not in a position to enjoy the tax exemptions established in Articles 269-e) and 270(2) of the CIMT, there being nothing to point out regarding the assessments object of the request for arbitral ruling.

• Article 270(2) of the CIRE does not suffer from unconstitutionality because the legislator did not legislate in a manner different from what is contained in the legislative authorization, respected the meaning conferred upon it (i.e., the granting of fiscal benefits within the framework of the insolvency proceeding), in an extension inferior to that attributed to it by the ordinary legislator, not exceeding any limit.

1. Object of the Request

The legality of acts of assessment of Stamp Duty and IMT is at issue, which did not apply to the acquisition of real property effected by the Claimant the exemptions provided for, respectively, in subparagraph e) of Article 269 and (2) of Article 270 of the Code of Insolvency and Enterprise Recovery (CIRE).

As preliminary questions, the exceptions raised by the Respondent are presented relating to the timeliness of the Request, propriety of the procedural means, and the competence of the tribunal.

1. Decision on the Exceptions

10.1. Untimeliness of the Request

As to the timeliness of the Request, the Respondent argues that, in application of Articles 10(1) of the RJAT and 102(1) and (2) of the CPPT, the Claimant should have submitted the Request for arbitral ruling within 90 days counted from the final date of voluntary payment of the assessment, on 24 October 2014. It acknowledges that the Claimant filed a Complaint for Administrative Review of the tax acts, but, as this was the subject of total dismissal, says that no request was made for the annulment of the respective decision, whereby the Request, submitted on 22 October 2015, for a ruling on the legality of the assessment act is untimely, the tribunal being unable to rule on what was not requested. In support of its thesis it cites several arbitral decisions rendered within the framework of the CAAD.

The Claimant responded to the exception, invoking, in the first place, that it had expressly alleged the existence of the decision in the administrative complaint proceeding and that it intended to challenge the order in question, alleging the respective legal and constitutional non-conformities. Whereby, anticipating the possibility of this invitation, the Claimant clarified that the request is for annulment of the order of the Tax Authority of 22 July 2015, which dismissed the complaint of the claimant which bore reference as …2015…, and the annulment of the acts of assessment of IMT and stamp duty, documents … and …, ordering the reimbursement to the claimant of the amount of €4,168.00, which it paid as Stamp Duty, and €30,644.75, which it paid as IMT, increased by the respective accrued interest, which is assessed on this date at €1,392.51, and accruing interest, at the rate of 4% per annum, until full and effective payment, and without prejudice to the interest arising from the provision of Article 43(5) of the LGT.

The Tribunal accepts the new formulation of the Request, more perfect than the initial one, recognizing, moreover, that the Claimant had mentioned (cf. nos. 12 to 15 of the Request) the dismissal decision in the administrative complaint proceedings, which it attacked implicitly and explicitly (example, no. 20 of the request), whereby one was not before a situation of untimeliness of the request[1].

In any event, it will be understood that the Request formulated by the Claimant is the corresponding to the formulation subsequently presented.

10.2. Impropriety of the Procedural Means and Competence of the Tribunal

The Respondent argues that the object of the Request for arbitral ruling has as object the right to tax exemptions provided for in the CIRE, whereby the granting of a fiscal benefit is at issue, a matter which, according to the law, should be the object of assessment through an administrative action—Article 97(2) of the CPPT—which does not fall within the competence of this tribunal, circumscribed to the matters listed in Article 2(1) of the RJAT, as it is reserved to the administrative and tax courts.

And it argues that, in the case of assessment of the recognition of a tax exemption related to the transfer of real property integrated in an insolvency proceeding, as the tax exemption provided for in Article 270(2) of the CIRE is based on the verification of legal prerequisites whose knowledge falls to the judicial court where the insolvency proceeding took place, only the judge holding the judicial proceeding (executive, bankruptcy or insolvency) is in a position to verify the legal prerequisites required in that law, done through judicial deed or sentence ratifying the transaction, and the assessment of the exemption of Article 270(2) of the CIRE is a question subject to judicial jurisdiction.

The Claimant disagrees, citing the decisions rendered in arbitral proceedings 99/2015-T and 123/2015-T.

Because the situation and arguments of the Respondent are identical to those in arbitral proceedings nos. 123/2015 and 599/2015 and because this tribunal entirely agrees with the reasoning there used, it transcribes the analysis on the matter made in the respective decisions regarding "questions of error in form of procedure and material incompetence" (our emphasis), adopting the respective reasoning and conclusion:

"The competence of arbitral tribunals operating in the CAAD is defined, in the first instance, by Article 2(1) of the RJAT, which establishes the following: 1—The competence of arbitral tribunals comprises the assessment of the following claims: a) The declaration of illegality of acts of assessment of taxes, self-assessment, withholding at source and payment on account; b) The declaration of illegality of acts of determination of taxable matter when not giving rise to the assessment of any tax, of acts of determination of collectable matter and of acts of determination of patrimonial values; In the second instance, the competence of arbitral tribunals operating in the CAAD is limited by the commitment of the Tax and Customs Authority which, in accordance with Article 4(1) of the RJAT, has been defined by Ordinance no. 112-A/2011, of 12 March, which establishes the following, in what here matters: The services and bodies referred to in the preceding article commit themselves to the jurisdiction of arbitral tribunals operating in the CAAD which have as object the assessment of claims relating to taxes whose administration is entrusted to them referred to in Article 2(1) of Decree-Law no. 10/2011, of 20 January, with the exception of the following: a) Claims relating to the declaration of illegality of acts of self-assessment, withholding at source and payment on account which have not been preceded by recourse to the administrative means in accordance with Articles 131 to 133 of the Code of Tax Procedure and Process; b) Claims relating to acts of determination of collectable matter and acts of determination of taxable matter, both by indirect methods, including the decision of the revision proceeding; c) Claims relating to customs duties on importation and other indirect taxes incurred on goods subject to import duties; and d) Claims relating to customs classification, origin and value of goods and customs quotas, or whose resolution depends on laboratory analysis or procedures to be carried out by another Member State within the framework of administrative cooperation in customs matters.

As can be seen, only in relation to customs matters is the definition of competencies made taking into account the type of taxes to which the claims are directed. And as to these the Tax and Customs Authority only committed itself as to the taxes administered by it. As to the rest, competence is defined only taking into account the type of acts which are the object of the challenge, there being, namely, no prohibition on assessment of matters relating to tax exemptions or any other questions of legality relating to the acts of the types referred to in Article 2 of the RJAT. An assessment of tax which starts from the disregarding of an exemption ceases to be a tax act of assessment. And the assessment of the legality or illegality of such disregarding does not, therefore, cease to be the assessment of a claim relating to the declaration of illegality of acts of assessment.

In the case in question, a tax assessment act of IMT is challenged, which are inserted in subparagraph a) of Article 2(1) of the RJAT, and whose assessment is not excluded by any of the norms of the aforementioned Ordinance.

Thus, in the arbitral proceeding, any illegality may, as a general rule, be attributed to assessment acts, as flows from Article 99 of the CPPT, subsidiarily applicable.

This will not be so only in cases where the law provides for the autonomous challengeability of administrative acts which are a prerequisite of assessment acts, as may occur with acts of recognition of tax exemptions, which, in the cases of non-automatic exemptions, assume the nature of detachable acts, for purposes of contentious challenge. But, for this limitation on the challengeability of the challenged assessment act to exist, there would have to have been previously practiced some administrative act which was a prerequisite of the assessment act, which did not occur in the case in question.

On the other hand, in this case, one is before an exemption of automatic recognition, as results from subparagraph d) of Article 10(8) of the IMT Code, whereby there did not have to be any autonomous act of recognition of the exemption, being at the appropriate moment for the practice of an assessment act the Tax and Customs Authority would have to assess whether the interested party enjoys a fiscal benefit.

For this reason, as the assessment act is prejudicial to the interests of the Claimant and being the only act practiced by the tax administration on the situation, its contentious challengeability must be ensured on the grounds of any illegality, as flows from the principle of effective judicial protection, enshrined in Articles 20(1) and 268(4) of the CRP.

On the other hand, the question of whether the assessment act is legal, when there is no detachable act, is the question of whether there has to be recognition of the exemption (by the Judicial Court or by the Tax and Customs Authority), are questions which have to do with the legality of the assessment, which should be assessed in the tax tribunals in proceedings for judicial challenge, as flows from subparagraph a) of Article 97(1) of the CPPT.

As concerns the thesis defended by the Tax and Customs Authority that it would be exclusively competent the Judicial Tribunal where the insolvency proceeding took place, it is manifest that it has no legal basis whatsoever.

In fact, there is no special norm of insolvency proceeding which attributes competence to judicial tribunals to recognize tax exemptions and the general regime of fiscal benefits contradicts that hypothesis unequivocally.

Indeed, the Statute of Tax Benefits (EBF) applies to all tax benefits (its Article 1). From Article 5 of the EBF it results that tax benefits, when they are automatic, are not the object of any autonomous act of recognition, whereby it is at the appropriate moment itself to decide whether an assessment act should be practiced that the question of verification by the Tax and Customs Authority of the occurrence or not of the prerequisites of the fiscal benefit is posed. As concerns fiscal benefits dependent on recognition, this is done through an administrative act, as results from Articles 2 and 3 of the same Article 5, in consonance with Articles 54(1-d) of the LGT and 65 of the CPPT.

In the specific case of the exemption provided for in Article 270 of the CIRE, one is before a fiscal benefit for which only Article 16(2) of the CIRE provides, the need for prior recognition by the Tax and Customs Authority when applied within the framework of a process of restructuring and revitalization of enterprises, provided for in Decree-Law no. 178/2012, of 3 August (…). In the other cases falling within Article 270 of the CIRE, not expressly providing for the need for prior recognition (neither in the CIRE, nor in the EBF, nor in Article 10 of the IMT Code), one is before an exemption of automatic recognition, with the responsibility for its verification and declaration falling to the tax service where the statement provided for in Article 19(1) of the IMT Code is presented, as results from the provision of subparagraph d) of Article 10(8) thereof.

On the other hand, being the right to fiscal benefits a right in tax matters, the possibility of its direct recognition by the Courts is reserved to the Tax Courts, through the action for recognition of a right or legitimate interest in tax matters, in accordance with Articles 212(3) of the CRP, 144(1) of the Law of Organization of the Judicial System (Law no. 62/2013, of 26 August), 49(1-c) of the ETAF, 101-b) of the LGT and 97(1-h) and 145 of the CPPT, whereby there is no legal basis for affirming the exclusive competence of the Judicial Courts for recognition of the exemption in question.

For this reason, the exceptions of error in form of procedure and material incompetence raised by the Tax and Customs Authority are without merit."

1. Sanation

The arbitral tribunal is materially competent, in accordance with the provision of Article 2(1-a) of the Legal Regime of Arbitration in Tax Matters.

The parties have legal personality and capacity, have standing and are legally represented, in accordance with Articles 4 and 10(2) of the Legal Regime of Arbitration in Tax Matters (RJAT) and Article 1 of Ordinance no. 112-A/2011, of 22 March.

The proceeding does not suffer from any nullity.

It is necessary to assess and decide the merits of the request.

II REASONING

1. Facts Proved

11.1. The Claimant, A… – Actividades Hoteleiras, Limitada, is a limited company constituted by two partners, husband and wife, and has its registered office at Rua … no…, … dto. (doc. no. 1).

11.2. The Claimant was a tenant of a location operating as a shop, situated at the address referred to in the previous number, where it operated a restaurant, the landlord being the respective owner, B… (doc. no. 3 filed with the Request).

11.3. In 2007, within the framework of an execution for payment of a fixed sum, in a proceeding brought by C… against B…, the monthly rents in the amount of € 356.23 paid by the Claimant in consideration for the leased space at no… of Rua … were subject to attachment up to the amount of € 2,207.03 (Doc. no. 3 filed with the Request).

11.4. The real property referred to in the previous numbers is part of the building with police numbers … to … of Rua …, composed of ground floor, 2 floors and attic, in a total area of 447m2—composed of 142m2 of covered area, a dependency of 49m2 and garden of 250 m2—currently with registry entry no… of the parish of … (doc. no. 2 filed with the Request).

11.5. It appears from the tax administration's cadastre records that B… was registered as exercising business activity, beginning on 1 January 1968, with such registration having been terminated on 21 June 1991, under Article 114(3) of the CIRS (PA., p. 31).

11.6. B… died on 4 June 2007, at age 89, leaving as successors his two children, D… and E…, the former, who was head of household of the estate, having died on 21 August 2009, leaving as heirs, spouse and two children (cf. heir certification and death certificate, filed in the proceedings).

11.7. On 20 January 2012, the Claimant presented to the Respondent a statement of real estate income paid in 2011 in the name of the holder of the lease contract referred to in 11.2 in the amount of € 2,024.40, with withholding for income tax purposes of the amount of € 334.08 (doc no. 5 filed with the Request).

11.8. The Claimant acquired the urban real property, situated at no… to … of Rua …, parish of…, municipality of…, registered in the registry under the number…, and described in the competent Real Property Registry under the number …/… within the framework of the insolvency proceeding no. …/10…. Y…, pending in the 6th Civil Court of …, (Docs. 1 and 2 filed with the Request).

11.9. Having E… brought an action of inventory to end the joint ownership by death of B… (certificate filed by the Respondent on 02/05/2016), the heirs came to request declaration of insolvency situation in accordance with Article 1361 of the CPC (then current wording).

11.10. The action was considered well-founded by judgment of 13 May 2014 which declared the insolvency of the estate opened by death of B…, with the case proceeding under the terms of insolvency, with appointment of an insolvency administrator.

11.11. Within the framework of the insolvency proceeding referred to in the previous number, was made, on 23 October 2014, the contract of sale and purchase of the real property referred to in the number…, for the price of five hundred and twenty-one thousand euros, with the parties bound by the insolvency administrator, in that capacity, and the partners of the Claimant.

11.12. The Claimant's intervention as purchaser was based on the exercise of right of preemption, as per the exchange of emails of 15 and 16 October 2014 (Document no. 8 filed with Request, and PA, p. 22).

11.13. On 22 October 2014, the Claimant requested the issuance of notices for payment of IMT and Stamp Duty with exemption in insolvency proceeding for the acquisition referred to in the previous number, invoking that "the real property in question was integrated in the establishment of the deceased B… (…), having been acquired within the framework of his business activity" (doc. no. 8 filed with the Request).

11.14. The notices for IMT and Stamp Duty relating to the alienation of the real property described with matriculation article U-…, parish of …, situated at Tv. … no…, destined for residential use, were issued on 23 October 2014, with tax assessment: IMT, in the amount of € 30,644.75 and Stamp Duty, in the amount of € 4,168.00, at the time of the contract of sale and purchase, proofs of the assessment and payment of both taxes were presented, 23 October 2014 (Doc. no. 1 filed with request).

11.15. On 23 October 2014 and 6 November 2014, were registered, respectively, the promise of alienation and the acquisition of the real property in question, with active subject "F..., Lda." and passive subject the Claimant (Doc. no. 2 filed with Request).

11.16. On 19 June 2014 was registered an action for declaration and nullity brought by G…, Unipessoal, Lda, against the insolvent estate of the inheritance, H… and A…, invoking that the real property had been adjudicated to it on 18 September 2014.

11.17. The Claimant presented, on 22 January 2015, administrative complaint of the assessments referred to in 11.14. (Doc. 11 filed with the Request), proceeded as cases nos. …2015… (Stamp Duty) and …2015… (IMT), whose draft dismissal orders decisions were notified by official letters of 8 June 2015 and 2 July 2015 (Doc. no. 12, filed with Request), transformed, after exercise of the right to be heard (Doc. no. 13), into final dismissal orders (Doc. 14).

1. Facts Not Proved

It was not proved that the building acquired by the Claimant was part of an enterprise of the author of the estate subject to the insolvency proceeding.

1. Reasoning for the Determination of the Facts

The facts were determined as proved on the basis of the documents filed by the Parties, namely with the request for arbitral ruling and the administrative file.

1. Application of the Law

14.1. The Situation of Fact to be Legally Framed

Analyzing the facts proved, the following situation is identified:

The Claimant is a company with registered office in the building sold—no… to … of Rua do…—constituted by a couple that operates (or operated) the restaurant "A…" situated in space existing in the same building, no…. The shop was leased, with the landlord being B…, owner of the entire building, composed of the shop and two floors, with residential apartments. B… was registered, for tax purposes, as exercising business activity, begun on 1 January 1968. The registration of exercise of activity was terminated on 21 June 1991, officially by the tax administration, upon verifying that there was no activity[2].

The owner died on 4 June 2007, at age 89, leaving as successors his two children, one of whom died later, on 21 August 2009, leaving in turn as heirs, spouse and two children.

The surviving son, in the capacity of head of household, brought an action of voluntary inventory for partition of assets to end the joint ownership by death of the deceased, and, afterwards the heirs requested declaration of insolvency situation, giving rise to the insolvency proceeding no. …/10… X…, in the 6th Civil Court of … with appointment of an insolvency administrator, action which was considered well-founded by judgment of 13 May 2014.

On 23 October 2014, the contract of sale and purchase was made of the entire real property situated at Rua …, nos… to…, for the price of five hundred and twenty-one thousand euros, with the parties bound by the insolvency administrator, in that capacity, and the partners of the Claimant.

The Claimant acquired the real property invoking exercise of right of preemption, and on the same date of acquisition would have entered into with "F…, Lda", contract promise of alienation of the real property in question, carrying out the sale of the same on 6 November 2014 (Doc. no. 2 filed with Request).

On 19 June 2015 was registered an action for declaration and nullity brought against the Claimant (and also against the insolvent estate of the inheritance represented by the insolvency administrator and an enterprise assessment consulting company) by an entity which invokes being the owner by adjudication carried out on 18 September 2014.

14.2. Application of the Law

14.2.1. Applicable Legal Provisions—Interpretation Doubts

In the present proceedings is at issue the application of the provisions of Articles 269, subparagraph e), and 270(2) of the Code of Insolvency and Enterprise Recovery (CIRE) approved by Decree-Law no. 53/2004, of 18 March, referring, respectively, to benefits "relating to stamp duty" and "to the municipal tax on onerous transfers of real property".

In the first case[3], it is a matter of possible application of the segment of the norm which provides for exemption from stamp duty regarding the sale of elements of the enterprise assets, as long as provided for in insolvency, payment or recovery plans or practiced within the framework of the liquidation of the insolvent estate.

In the second case[4], it is a matter of knowing whether there is place for the application of the IMT exemption in acts of sale, exchange or transfer of the enterprise or of establishments thereof integrated within the framework of an insolvency or payment plan or practiced within the framework of the liquidation of the insolvent estate.

These norms are inserted in Title XIII of the CIRE, referring to "Emolumentary and Fiscal Benefits", Article 268 referring to benefits in IRS and IRC[5]. They correspond to Articles 118 to 121 (section VI of Title II) of the Code of Special Proceedings for Enterprise Recovery and Bankruptcy (CPEREF), approved by Decree-Law no. 132/93, of 23 April.

Whereas the current subparagraph e) of Article 269 of the CIRE reproduces the content of subparagraph f) of Article 120 of the CPEREF, Article 270(2) of the CIRE is not entirely coincident with the content of Article 121 of the CPEREF, whose paragraph 2 provided that are still exempt from municipal sisa tax the transfers of real property, integrated in any of the enterprise recovery measures, arising "from the legal separation of commercial or industrial establishments, the sale, exchange or transfer of elements of the enterprise assets, as well as long-term leases (…)" (subparagraph c) of paragraph 2).

14.2.2. Interpretation Doubts—Opposing Positions on Sisa/IMT Exemption

Regarding the scope of the IMT exemption granted in Article 270(2) of the CIRE several situations of litigation have arisen both in cases submitted to judgment of the administrative and tax courts and within the framework of tax arbitration.

One of the disputed questions is whether the IMT exemption provided for in Article 270(2) of the Code of Insolvency and Enterprise Recovery (CIRE) applies to the acquisition, in the phase of liquidation of assets in an insolvency proceeding, of a real property which had been part of the assets of the insolvent enterprise, the Tax Administration understanding that the fiscal benefits provided for in that provision depend on the transferred real property being integrated in the universality of the enterprise or establishment sold, exchanged or transferred within the framework of an insolvency or payment plan or the liquidation of the insolvent enterprise.

The Judgment rendered on 30 May 2012 by the STA, in case no. 0949/11, cited by other decisions of the same court, as well as by numerous arbitral decisions already rendered within the framework of the CAAD, understood that are "exempt from IMT not only the sales of the enterprise or establishments thereof, as universalities of assets, but also the sales of elements of its assets, as long as integrated within the framework of an insolvency or payment plan or practiced within the framework of the liquidation of the insolvent estate". Despite acknowledgment that "in light of the letter of the law, either one or the other of the interpretations are defensible, appearing, however, grammatically more correct the one sustained by the tax administration, for the terms sell, exchange and transfer are all transitive verbs, hence in the phrase the reference to the enterprise or establishments thereof appears as the direct object of all three". However, resorting to other interpretive elements, namely the statement in paragraph 49 of the preamble of the CIRE that the prior regime of fiscal benefits was maintained, and that, given Article 121 of the prior Code, the sisa exemption embraced the transfers of elements of the enterprise assets and that the diploma was issued in use of legislative authorization in which was contained the possibility of the exemption encompassing the sale, exchange or transfer of the enterprise, establishment or elements of its assets.

Thus, because the Government did not respect "the meaning and extension of the legislative authorization that was conferred upon it, having legislated in a matter reserved to the Assembly of the Republic in disrespect of the parliamentary credential conferred upon it", and despite considering "doubtful that the ordinary legislator of the CIRE intended to confer on the Sisa/IMT exemption provided for in Article 270(2) thereof the same scope that the prior Sisa exemption had provided for in subparagraph c) of Article 121(2) of the CPEREF", the STA decided that "the option of the meaning of its restriction was not permitted to it, for in matters of fiscal benefits legislates in a domain reserved to the Assembly of the Republic, having to respect the limits which it fixed, namely those regarding the meaning and extension of the authorization".

Another Judgment rendered by the STA, on 17 December 2014, in case no. 01085/13, went beyond the ambiguity of the text of Article 270(2) of the CIRE, proposing a "reading more clear and unequivocal without recourse to any extensive interpretation". It was considered that given the purpose of "promoting and supporting the rapid sale of assets that make up the insolvent estate for obvious reasons of creditor interests and public interest in the resumption of normal functioning of the business world in which each insolvency proceeding presents itself as a disturbing element, giving a (fiscal) bonus to whoever acquires the real property that make up the insolvent estate" it makes no difference "whether the enterprise is being sold globally with all its assets and liabilities, whether one or more of the commercial establishments that comprised it are being sold, whether assets that were part of its assets but were not used in its business operations are being sold, such as for example a real property received in payment of a debt of which the insolvent enterprise was creditor, for one to be before a sale which is practiced within the framework of the liquidation of the insolvent estate".

The interpretations referred to above have been accepted in diverse decisions of the STA and of arbitral tribunals within the framework of the CAAD. However, to the contrary, the arbitral decision rendered in case no. 200/2015-T, also ruling on the scope of Article 270(2) of the CIRE, opted for, invoking the unsuitability of analogical application of norms on fiscal benefits and the diverse elements of interpretation, considering confirmed the literality of the referred norm.

Recalling that the norms of the IMT Code have as object the variety of real or fictional transfers, using indistinctly, and sometimes even with some redundancy and lack of rigor, diverse denominations such as, for example, sale, alienation, purchase and sale, exchange, transfer, all expressions which aim to capture the various types of transfer subject to fiscal duty, concludes, just like the STA in proc. 949/2011, to be grammatically more correct the position sustained by the tax administration, for the terms sell, exchange and transfer are all transitive verbs and, being so, the reference to the enterprise or establishments thereof appears as the direct object of the said verbs.

As to the rational element, the purpose of the law, it considers that nothing permits concluding that the fiscal benefit should apply to any and every transfer of the assets of the insolvent enterprise or even that the legislator or the law itself wanted that result.

As to the systematic element, observing the parallelism and differences in the formulation of Articles 268, 269 and Article 270(1) of the CIRE, it concludes namely, that, differently from other norms in which the end pursued with the fiscal benefits was different, the legislator, in Article 270(2) of the CIRE, privileged the alienation of the whole of the assets of the insolvent enterprise or of any of its establishments with a view to protecting its continuation and its operation under another owner.

As to the historical element, it concludes that, even if it is understood that in the wording of Article 270(2) of the CIRE, the Government did not respect the meaning and extension of the legislative authorization granted by Law no. 39/2003, of 22 August, one must take into account that with the amendment to the wording of Article 270 of the CIRE by Law no. 66-B/2012, of 31/12 (Article 234) that argument ceased to have any relevance whatsoever, since the Assembly of the Republic itself, in maintaining, in that part, the wording of Article 270(2) previously given by the Government, remedied, at least for the future, any vice and any objection which could be attributed to the initial publication of the norm in question.

In relation to this controversy it will always be said, despite, and to the contrary of the weighing made by the Claimant, not understanding it to be directly relevant to the solution of the case at hand, that this tribunal considers it proper to accept the reasoning and conclusions adopted in arbitral decision no. 200/2015-T, for the reasons stated below.

14.2.3. Insolvency Proceeding and Purpose of the Exemptions Granted in the Acquisition of Assets

The approval of the Code of Special Proceedings for Enterprise Recovery and Bankruptcy (CPEREF), by Decree-Law no. 132/93, of 23 April, introduced a historic turn in bankruptcy proceedings, moving from mere defense of the creditor's right to secure its credit to a means of enterprise recovery[6].

The amendments to the CPEREF introduced by DL no. 315/98, of 20/10, recognized beyond bankruptcy and insolvency, "a third genre, a new assumption of the proceeding, that is, an economic situation difficult evidenced by considerable economic or financial difficulties that hinder the normal functioning of the enterprise or the pursuit of its corporate purpose"[7].

In the CPREF the exemptions relating to sisa tax were found in Article 121, which provided (our emphasis):

"1—Are exempt from municipal sisa tax the transfers of real property, integrated in any of the enterprise recovery measures, which are intended: a) For the constitution of the company, in accordance with Article 80, and the completion of its capital; b) For the completion of the capital increase of the company in accordance with subparagraph a) of Article 88(2) and Article 90, as well as Article 100(1).

2—Are also exempt from municipal sisa tax the transfers of real property, integrated in any of the enterprise recovery measures, arising: a) From the transfer to third parties or the alienation of shareholdings representative of capital of the company, provided for in subparagraphs b) and c) of Article 88(2) and Article 91, as well as in Articles 100(1) and (2); b) From performance in kind of enterprise assets and transfer of assets to creditors, provided for in subparagraphs d) and e) of Article 88(1) and Article 93, as well as in Article 100(1); c) From the legal separation of commercial or industrial establishments, the sale, exchange or transfer of elements of the enterprise assets, as well as long-term leases, provided for, respectively, in subparagraphs e), f) and g) of Article 101(1).

Law no. 39/2003, of 22 August, authorized the Government to legislate on the insolvency of natural and legal persons revoking the Code of Special Proceedings for Enterprise Recovery and Bankruptcy and approving the Code of Insolvency and Enterprise Recovery. This new Code would regulate a universal execution proceeding with the purpose of liquidation of the assets of insolvent debtors and distribution of the product obtained among creditors or their satisfaction by the form provided in an insolvency plan based notably on the recovery of the enterprise comprised in the insolvent estate (nos. 1 and 2 of Article 1).

As to fiscal benefits within the framework of the insolvency proceeding, it was provided for, no. 3 of Article 9 of the same enabling law:

"3—The Government is finally authorized to exempt from municipal sisa tax the following transfers of real property, integrated in any insolvency or payment plan or carried out within the framework of the liquidation of the insolvent estate:

a) Those intended for the constitution of new company or companies and the completion of its capital;

b) Those intended for the completion of the capital increase of the debtor company;

c) Those arising from the transfer to third parties or the alienation of shareholdings representative of capital of the company, from performance in kind of enterprise assets and transfer of assets to creditors, from the sale, exchange or transfer of the enterprise, establishments or elements of its assets, as well as long-term leases".

The CIRE, as already referred to, concretized the legislative authorization provided for in subparagraph c) of Article 9(3) in Article 270(2), which provides "Are equally exempt from municipal tax on onerous transfers of real property the acts of sale, exchange or transfer of the enterprise or of establishments thereof integrated within the framework of an insolvency or payment plan carried out within the framework of the liquidation of the insolvent estate". (to which Law no. 66-B/2012, of 31/12 added "or recovery").

It seems we should emphasize that the CIRE, although it has extended the application of recovery processes to insolvent debtors who are natural persons, remains fundamentally as a Code directed to the solution of situations of non-performance in business activity. On the other hand, although the concern with the recovery of enterprises is maintained, the emphasis is now placed on the need to satisfy the credits of those engaged in the activity, emphasizing that public interest in the viability of insolvent enterprises should be the object of decision by the same creditors[8].

The bulk of the regulation is clearly directed to subjects of business activity[9], with identification of the (innovative) norms relating to natural persons not merchants[10].

Thus, paragraph 49 of the preamble, in affirming that "the regimes existing in the CPEREF as regards exemption from emoluments and fiscal benefits, as well as the indication of criminal offense, are maintained in essence", should be interpreted taking into account the letter and spirit of both diplomas.

When Article 121 of the CPEREF provided in subparagraph c) of paragraph 2, exemption from IMT for transfers arising "From the legal separation of commercial or industrial establishments, the sale, exchange or transfer of elements of the enterprise assets, as well as long-term leases (…)", it required that it be "transfers of real property, integrated in any of the enterprise recovery measures" (preamble of Article 121(1)).

Article 270(2) of the CIRE, equivalent to subparagraph c) of Article 121(2) of the CPEREF, says that: "Are equally exempt from municipal tax on onerous transfers of real property the acts of sale, exchange or transfer of the enterprise or of establishments thereof integrated within the framework of an insolvency or payment plan or carried out within the framework of the liquidation of the insolvent estate"[11]. (And in the initial version, the legislator may have forgotten to include the possibility of inclusion of the act in a recovery proceeding, which was added in Law no. 66-B/2012, of 31/12).

Unlike what occurred with Articles 121(1) and (2) of the CREPFE, it is verified that in the CIRE there is no complete parallelism between the prerequisites of application of Article 270(1) and (2) of the CIRE, since Article 270(1) enumerates situations of transfer of real property which can enjoy IMT exemption integrated in any insolvency or payment plan and Article 270(2) enumerates transfers integrated in a plan or within the framework of liquidation of the insolvent estate.

Given the greater openness as to the type of procedure in which the transfer operates, it seems justified that the legislator considered it more appropriate not to include, however, in the enumeration of exemptions the cases of isolated transfers of enterprise real property. And, if that be so, as we deem logical, it would really have been that the ratio legis, both in Decree-Law no. 53/2004 (Government) and in Law no. 39/2003 (AR).

Because, although the CIRE emphasized creditor interest in seeing their credits satisfied, nothing seems to indicate that it intended to extend the scope of the exemption, in "other situations" provided for in Article 270(2) (and diverse from those provided for in Article 270(1), referring to transfer to the creditors themselves)[12], in which the enterprise assets will be sold to third parties, giving them the possibility of obtaining additional advantages by finding situations of enterprise collapse, taking advantage of ruins, and without that meaning the maintenance of business activity (neither of the debtor nor of the creditor).

For these reasons, we adhere to the interpretation accepted in decision 200/2015-T, deeming moreover that the maintenance of the text referred to therein when the amendments to the article were made by Law no. 66-B/2012, is confirmatory of the real legislative intent.

14.3. Application of the Law to the Concrete Case

In accordance with the facts considered proved, we therefore have the following situation:

• The Claimant is a company which operated a restaurant situated in a shop leased in the real property transferred by the judicial administrator of the estate of B… (landlord), deceased in 2007 at age 89. The owner of the real property—composed of the shop and floors for residential use—had various assets and debts whereby the heirs resorted to an action of voluntary inventory and afterwards to an insolvency proceeding, with insolvency of the estate being declared on 13 May 2014.

• The author of the estate appears in the AT records as having been registered for the exercise of business activity between 1968 and 1991, the year in which the registration was terminated officially due to lack of activity.

• The Claimant acquired the entire real property in which is situated the shop leased, by virtue of the exercise of preemption, having made the contract on 23 October 2014, the date on which it also promised to sell the same real property to a company apparently dedicated to real estate investments, having completed the sale on 6 November 2014, there existing at the date of presentation of the present arbitral request a judicial dispute concerning the legality of the adjudication to the Claimant.

The Claimant, invoking the provisions of Articles 269 and 270(2) of the CIRE, claims to have the right to exemption from Stamp Duty and IMT regarding the acquisition made within the framework of the above-referred insolvency proceeding, of the real property where is situated the shop of which it was tenant.

As already mentioned, the prerequisites defined, respectively in Articles 269 and 270 of the CIRE, for the granting of exemption from IS and IMT, are not identical, regarding the transfers of real property of enterprises within the framework of an insolvency proceeding, because the former provides, in subparagraph e), a benefit for the transfer of elements of the enterprise assets, whereas Article 270(2) does not provide for exemption for real property transferred separately, giving rise to the doubts referred to above.

However, in this case, what is at issue is not the transfer of real property of an enterprise but of a real property belonging to a pending estate, declared insolvent, and the purchaser is a company which had leased a space used as a shop (restaurant) existing in the same real property and which the purchase covered not only the space used for that shop but the entire building, real property not divided into parts capable of independent use.

The purchaser, Claimant in the present proceedings and in accordance with the facts proved, neither appears to have continued its restaurant activity in the space, rather reselling the entire real property to another entity (there appearing, moreover, to be even a dispute regarding its legitimacy to acquire).

Thus, regarding IMT and regardless of the position taken in the aforementioned controversy, there is no place for the application of the benefit provided for in Article 270(2) of the CIRE, because it would always have to be a question of real property which was part of the assets of an enterprise and not the real property of natural persons (or making up their estate), with the sole justification of being part of an insolvency proceeding.

Thus, it was decided, and rightly so in our view, in the Judgment rendered by the STA on 3 July 2013, in case no. 0765/13, that as to the scope of the IMT exemption enshrined in Article 270(2) of the CIRE it was not considered clear admitting "it may, at most, be interpreted as encompassing not only the sales of the enterprise or establishments thereof, as universalities of assets, but also the sales of elements of its assets, as long as integrated within the framework of an insolvency or payment plan or practiced within the framework of the liquidation of the insolvent estate" (point I of the summary). And concluded, in the case in question, "the said exemption does not encompass the sale of urban real property intended for residential use, which belongs to a natural person, not sufficing for benefiting from that exemption the fact that these are sales acts practiced within the framework of the liquidation of the insolvent estate, regardless of whether the same belongs to a natural person or legal entity (business entity).

In the present proceedings, the real property acquired by the Claimant is listed in the registry as real property for residential use not capable of individualized use and was part of the assets of a natural person who derived from its lease real estate income and not business income, not being therefore encompassed by the IMT exemption provided for in Article 270(2) of the CIRE.

And also as to Stamp Duty, regarding which is invoked the application of subparagraph e) of Article 269 of the CIRE, despite this norm encompassing acts of transfer of real property of an enterprise, there is no place, in these proceedings, for the application of the exemption, because what is at issue is not the sale of a real property belonging to an enterprise or intended for the exercise of business activity—the building no. 137 to 141 was the property of a natural person, who received income in the form of real estate rents, at least as to the space occupied by a shop, but which was classified as real property for residential use.

As decided by the Judgment of the STA rendered on 25 September 2013, in case no. 866/13, "I—In accordance with the provision of Article 269, subparagraph e), of the CIRE, are exempt from IS the sales of "elements of the enterprise assets". II—Thus, the said exemption does not encompass the sale of urban real property intended for residential use which belongs to a natural person, not sufficing for benefiting from that exemption the fact that these are sales acts practiced within the framework of the liquidation of the insolvent estate, rather it is necessary to demonstrate that the asset sold is part of the assets of an enterprise."

In the same sense was decided in case no. 13/2016-T, where it was concluded that subparagraph e) of Article 269 of the CIRE grants exemption from IS for the sales of elements of the assets of enterprises, and cannot here be understood to include the sales of assets of natural persons, not businesspersons or holders of enterprises, once that is not provided for in the norm under analysis[13].

By what was stated, it is concluded that the case at hand—situation in which the real property belonging to the assets of the estate in insolvency proceeding was not dedicated to business activity, neither of the estate nor, previously, of the author of the estate—cannot be subsumed under the provision of subparagraph e) of Article 269 of the CIRE, referring exclusively to the sale of "elements of the enterprise assets".

Thus, the present Request is judged without merit, confirming that neither the decisions which dismissed the administrative complaints filed nor the assessment acts themselves suffer from illegality, there being no violation of Articles 269, subparagraph e), and 270(2) of the Code of Insolvency and Enterprise Recovery (CIRE).

And, the arbitral request being without merit, so is also the request for reimbursement of amounts paid, as well as indemnity interest.

III. DECISION

1. In light of the foregoing, the present Arbitral Tribunal decides:

a) To judge without merit the present request for declaration of illegality of the assessment of IMT in the amount of € 30,644.75 (thirty thousand six hundred and forty-four euros and seventy-five cents) and of the assessment of Stamp Duty in the amount of € 4,168.00 (four thousand one hundred and sixty-eight euros), maintaining the said assessment acts as well as the decisions of dismissal rendered in administrative review proceeding which had as object those acts.

b) To condemn the Claimant to pay the costs of the present proceeding.

1. Value of the Proceeding and Costs

The value of the proceeding is fixed at € 36,205.26 (thirty-six thousand two hundred and five euros and twenty-six cents) in accordance with Article 97-A(1) of the CPPT, applicable by virtue of Article 29(1-a) of the RJAT and Article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

The amount of costs is fixed at € 1,836.00 (one thousand eight hundred and thirty-six euros), to be borne by the Claimant and calculated in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, all in accordance with Articles 12(2) and 22(4) of the RJAT and Article 4 of the RCPAT.

Lisbon, 26 September 2016.

The Arbitrator

Maria Manuela Roseiro

[1] As we have defended in other proceedings (nos. 434/2015-T, 165/2015-T and 347/2015-T), we believe that what is intended with the frequently cited, peaceful and reiterated jurisprudential understanding, that the "judicial challenge which follows the decision of administrative complaint presented against an assessment act has as its immediate object the decision act of the complaint and as its mediate object the assessment act itself, as indeed is extracted from subparagraph c) of Article 97(1) of the CPPT" (in all respects, Judgment of the STA of 20 May 2015, in case no. 01021/14), is, fundamentally, that "once the dismissal of the complaint is annulled due to procedural vice thereof, it falls to the court to know of the remaining vices attributed to the assessment act, once this is competent to know, in such challenge, either of the dismissal of the complaint or of the vices attributed to the assessment" (judgment referred to and which cites other STA rulings, of 16.06.2004, in case no. 01877/03, of 28.10.2009, in case no. 0595/09, of 18.05.2011, in case no. 0156/11, of 16.11.2011, in case no. 0723/11, of 18.06.2014, in case no. 01942/13).

[2] The wording of Article 114(3) provides that Notwithstanding the facts provided for in paragraph 1, the tax administration can still officially declare cessation of activity when it is manifest that this is not being exercised nor is there any intention to exercise it, or whenever the taxpayer has declared the exercise of an activity without possessing an adequate business structure in conditions to exercise it. It corresponds to Article 106 before the wording of the Code given by DL 198/2001, of 3 July. (Despite the cessation being of 1991, the references will be found automatically updated because business activity at the time was also not category B but C).

[3] Article 269, referring to "Benefits relating to Stamp Duty", provides: modifications of the maturity periods or interest rates of credits on the insolvency; b) Capital increases, conversions of credits into capital and alienations of capital; c) The constitution of new company or companies; d) Performance in kind of enterprise assets and transfer of assets to creditors; e) The carrying out of financing operations, the business transfer or transfer of the operation of enterprise establishments, the constitution of companies and the transfer of commercial establishments, the sale, exchange or transfer of elements of the enterprise assets, as well as the leasing of assets; f) The issue of bills or promissory notes.

[4] Article 270, referring to "Benefit relating to municipal tax on onerous transfers of real property", provides: "1—Are exempt from municipal tax on onerous transfers of real property the following transfers of real property, integrated in any insolvency or payment plan: a) Those intended for the constitution of new company or companies and the completion of its capital; b) Those intended for the completion of the capital increase of the debtor company; c) Those arising from performance in kind of enterprise assets and transfer of assets to creditors. 2—Are equally exempt from municipal tax on onerous transfers of real property the acts of sale, exchange or transfer of the enterprise or of establishments thereof integrated within the framework of an insolvency or payment plan or of recovery carried out within the framework of the liquidation of the insolvent estate" (wording given by Article 234 of Law no. 66-B/2012, of 31 December—Budget for 2013, which introduced the underlined segment).

[5] Article 268, referring to Benefits relating to taxes on the income of natural persons and legal entities, provides: "1—Capital gains realized by the effect of performance in kind of debtor assets and transfer of assets to creditors are exempt from taxes on the income of natural persons and legal entities, not competing for the determination of the collectable matter of the debtor. 2—Neither do the positive patrimonial variations resulting from the changes to its debts provided in an insolvency plan or in a payment plan enter into the formation of the collectable matter of the debtor. 3—The value of credits which is the object of reduction, under an insolvency plan or a payment plan, is considered as cost or loss of the respective financial year, for purposes of determination of taxable profit of the taxpayers of the tax on the income of natural persons and the tax on the income of legal entities".

[6] Paragraph 2 of Article 1 of the Code said: "bankruptcy of an insolvent enterprise should only be decreed when it shows itself economically unviable or when it is not considered possible, in light of the circumstances, its financial recovery". The Preamble (no. 7) speaks of norms insufflated by the new spirit which better accords with the priority thinking of the recovery of debtor enterprises.

[7] Cf. preamble of DL no. 315/98. Which contains statements in the sense of the need for viable enterprises for the Portuguese business fabric, considering viable many of the enterprises in recovery proceedings and that the mechanisms contained in the CPEREF have suitability for the achievement of that objective, both by the means consecrated to enterprise recovery, and by the security offered by the bankruptcy proceeding.

[8] In the preamble it is stated namely that: The overriding objective of any insolvency proceeding is the satisfaction, in the most efficient manner possible, of the rights of creditors. Whoever intervenes in legal commerce, and especially when exercising commercial activity therein, assumes by that reason undeniable duties, at the head of them that of honoring the commitments assumed. Economic and business life is life of interdependence, whereby non-performance by certain agents necessarily repercusses on the economic and financial situation of others. It is urgent, therefore, to provide them with the suitable means to face the insolvency of their debtors, as impossibility to promptly fulfill vested obligations. Being the common guarantee of credits the assets of the debtor, it is to the creditors that it falls to decide as to the best effectuation of that guarantee, and it is by that means that, surely, public interest in the preservation of the proper functioning of the market is best satisfied. When in the insolvent estate is comprised an enterprise which did not generate the income necessary to fulfill its obligations, the best satisfaction of creditors may pass both through the closure of the enterprise, as through its maintenance in activity. But it is always upon the estimate of creditors that should depend, in the last analysis, the decision to recover the enterprise, and on what terms, namely as to its maintenance in the ownership of the insolvent debtor or in that of another. And, we repeat, that estimate will always be the best form of realization of public interest in market regulation, maintaining in operation the viable enterprises and expurging from it those which are not (even if, in the latter hypothesis, unviability may result only from the fact that creditors see no interest in the continuation). (cf. no. 3 of the preamble). And it is further stated: "Departing from the erroneous idea affirmed in the current law, as to the supposed prevalence of the means of enterprise recovery, the model adopted by the new Code thus clarifies, from its inception, that it is always the will of creditors which commands the entire proceeding. The option which the law gives them is that of taking shelter under the regime supplementarily provided for in the Code—which could not but be that of immediate reparation of creditors through the liquidation of the assets of the insolvent or to depart from it, providing by their initiative to a different treatment of payment of its credits. It is to the creditors that it falls to decide whether payment shall be obtained by means of integral liquidation of the debtor's assets, in accordance with the regime provided for in the Code or in that of what is contained in an insolvency plan which they come to approve, or through the maintenance in activity and restructuring of the enterprise, in the ownership of the debtor or of third parties, in the manner also contained in a plan" (no. 6 of the preamble of DL 53/2004).

[9] "The subjection to the insolvency proceeding of natural and legal persons, both holders of enterprises and outside any business activity, is not done without the provision of regimes institutes differentiated for each category of entities, which permit the best normative treatment of the respective insolvency situations. As mentioned above regarding the insolvency plan, this will be tendentially used by enterprises of greater dimension. In the treatment dispensed to natural persons, highlighted are the regimes of waiver of remaining liabilities and the payment plan" (cf. no. 44 of the preamble of DL 53/2004).

[10] The Code conjugates in innovative manner the fundamental principle of reparation of creditors with the attribution to insolvent single debtors of the possibility of freeing themselves from some of their debts, and thus permitting their economic rehabilitation. The principle of fresh start for natural persons of good faith incurred in an insolvency situation, so widespread in the United States, and recently incorporated into German insolvency legislation, is now also accepted among us, through the regime of "waiver of remaining liabilities". The general principle in this matter is that the debtor natural person can be granted waiver of credits on the insolvency which are not integrally paid in the insolvency proceeding or in the five years following the closure thereof (cf. point 45 of the preamble of DL 53/2004).

[11] In Article 270(1) are enumerated situations of transfer of real property which can enjoy exemption from municipal tax on onerous transfers of real property are exempt integrated in any insolvency or payment plan: a) intended for the constitution of new company or companies and the completion of its capital; b) Those intended for the completion of the capital increase of the debtor company; c) Those arising from performance in kind of enterprise assets and transfer of assets to creditors. These are measures which satisfy creditor interest maintaining the debtor enterprise, although with change of ownership, or creating other company or companies.

[12] As observed in the Judgment of the STA of 17/12/2014, case 1085/13, "Paragraph 2 of this article (read Article 270) does not repeat the exemption which it provided for in paragraph 1, extends it to persons who, external to the insolvency proceeding because they are not the creditors who acquired the assets, the insolvent enterprise which saw its capital increased, or the enterprise which formed from this proceeding, these, already contemplated in Article 270(1), but to those who acquire real property unitarily considered or integrated in the global or partial acquisition of the enterprise.

[13] Citing: "(…) the norm under analysis clearly and expressly provides that the exemption from IS applies to the "sale, exchange or transfer of elements of the enterprise assets" and does not provide that the exemption from IS applies to the sale, exchange or transfer of assets held by natural persons. In consequence, ubi lex non distinguir nec nos distinguere debemus. Hence, the exemption from IS provided for in subparagraph e) of Article 269 of the CIRE only applies regarding real property which is part of the assets of an enterprise and not to real property of natural persons."